China

Comment: China must act on free-trade pledge

What is the potential scope of the Chinese wind market? How global does the quasi-communist state want its renewables sector to be? What does the future really look like for potential global investors in the superpower? China has never been easy to forecast.

That the Asian behemoth is far from the world's most open and transparent economy is hardly news. The lack of openness cuts through China's entire economy - its wind sector has no monopoly on opacity and detachment. But recent pronouncements by the Chinese government suggested that the wind sector at least might soon blaze a trail and take a blowtorch to the ice. Now it stands accused of turning the freeze back on.

At the turn of this year, Chinese officials pledged to bin the nakedly protectionist rule that 70% of Chinese wind plant components must be manufactured locally. The news came as a relief to foreign investors, who relished the prospect of new business in the East. Yet, only eight months later, the US's biggest industrial trade union says the revocation of the local content law was nothing more than a mirage.

No change

United Steelworkers say that the Chinese government has reneged on its promise to abandon the controversial rule - and that the Chinese wind sector remains as protectionist as ever.

As well as reneging on the headline pledge, the US union asserts, China is continuing to further the interests of its own suppliers through a raft of other policies. The union warns that foreign firms are being handed grants and subsidies if they use Chinese equipment. It adds that Chinese firms are granted sufficient bonus points in the wind farm concession process to ensure that no foreign firm has ever won a bid.

Some observers might sniff at the irony of a trade union seemingly flying the flag for free trade. But no matter, its critique is clear and wide-ranging and deserves a hearing. This journal has always been an opponent of protectionism - and notes that China now runs the risk of compounding its poor record on free trade if it is found guilty of saying one thing and doing another.

That point, however, has not yet come. China remains merely accused - it has not been convicted. It still has the chance to back up its pledge to strip away protectionist trade restrictions with clear evidence that it is serious about opening up its markets. It must do so swiftly.

Response

China should not assume that, if its promises are found to be empty, it would automatically shrug off any retaliation. The midterm elections loom in the US and some politicians sense the opportunity to make political capital from a growing suspicion that Chinese wind is failing to reciprocate America's welcome. Tit-for-tat laws are possible.

China does not want to find itself in a position where the US imposes countermeasures that restrict the Eastern giant's investment in the world's biggest wind nation. More, it wants to avoid the tag of being the world's spoiler - the country that prevented an exciting, valuable clean energy industry from reaching its potential, by failing to keep its promises and closing gates rather than opening doors.

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